August 7th (Bloomberg) – Cia. Vale do Rio Doce, the world’s biggest iron-ore producer, said second-quarter profit climbed 22 percent to the highest ever on record contract prices for supplies sold to steel producers.

Net income rose to $5.01 billion, or $1.02 a share, from $4.095 billion, or 85 cents, a year earlier, Rio de Janeiro-based Vale said today in a statement posted on the Brazilian security regulator’s Web site. The results topped the average estimate of 91 cents a share from eight analysts surveyed by Bloomberg News.

Sales surged 22 percent after Vale won annual price increases of at least 65 percent in supply contracts for iron ore, which accounted for more than half of sales in the quarter. Still, profit was eroded as the average price of nickel, the company’s second-biggest source of revenue, fell 43 percent from a year earlier.

“The market is in a buying mood after this result,” said Daniel Gorayeb, an analyst at Spinelli SA in Sao Paulo. “The company managed to take advantage of market demands by producing more of its higher-value products and focused more on what was of interest, which conveys a positive image.”

Analysts’ Estimates

Vale, led by Chief Executive Officer Roger Agnelli, is spending $59 billion in the five years through 2012 to increase iron-ore capacity by 40 percent to 450 million metric tons a year and double nickel and copper production. Vale raised $12.1 billion in a July share sale, the biggest ever by a Brazilian company, to fund expansion and acquisitions.

The value of Vale’s iron-ore sales climbed 72 percent to $6.12 billion in the quarter, while nickel plunged 41 percent to $1.87 billion.

Vale this year negotiated a sixth annual increase in contract prices for its iron ore, the main raw material used to make steel. Nickel for delivery in three months averaged $25,919.69 a metric ton on the London Metal Exchange during the quarter, down 43 percent from a year earlier.

Vale said profitability at its nickel operations are high because the company is a low-cost producer.

“In the medium term, the combination of a reduced level of stainless-steel stockpiles and a drop in nickel inventories creates a favorable environment for the strong recovery of prices of the metal,” Vale said in the statement.

Copper, Coal

Agnelli is seeking to expand in coal and copper as quarterly profit growth slowed from a 69 percent average in the past four years. In May, Agnelli told business leaders in Rio de Janeiro that “if Vale doesn’t grow, it will be swallowed.”

Net revenue rose to $10.6 billion from $8.69 billion in the second quarter of 2007. Vale was expected to post sales of $11.8 billion, the average of four estimates compiled by Bloomberg.

The results are based on generally accepted accounting principles in the U.S.

Based on Brazilian accounting standards, profit fell 22 percent as a weaker dollar eroded the value of exports when converted back into the local currency. Net income fell to 4.57 billion reais ($2.9 billion), or 94 centavos a share, from 5.84 billion reais, or 1.21 reais a share, a year earlier, Vale said in a statement on its Web site. Sales climbed 3 percent to 18.3 billion reais.

Most of Vale’s sales are priced in dollars. The U.S. currency fell 17 percent against the Brazilian real in the 12 months through the end of the second quarter.

Vale’s American depositary receipts gained 2.3 percent to $27.30 at 7:21 p.m. in after-hours trading in New York.

In regular Sao Paulo trading, Vale rose 1.9 percent to 36.71 reais. The stock has declined 28 percent this year, compared with a 9.9 percent drop for Brazil’s Bovespa stock index.


June 29th (Steel Guru) – It is reported that despite recent iron ore price hike negotiated by Rio Tinto, iron ore mining giant Vale would continue its leader position in global iron ore trade.

Mr Roger Agnelli CEO of CVRD told the local Estado news agency that Vale would maintain its position as a key player in the iron ore market, despite the recent breakdown in the benchmark pricing system and Rio Tinto’s possible tie up with BHP Billiton.

Mr Agnelli said that “Vale, alone, is bigger in iron ore than Rio Tinto and BHP together. So we have a very strong position in the international market. It is practically impossible to ignore the size and strength of Vale in this market.”

Mr Angelli also said that “The prices of minerals and principal global commodities remain elevated. Demand continues to be very strong, primarily in Asia. But the higher prices garnered by Rio Tinto meant an end to the traditional benchmarking system.”

He however added that “It needs to be seen whether other Chinese steelmakers will follow this price hike deal with Baosteel as well as whether Japanese steelmakers will also go along with the increase. But the market tends to have a single price. For now, we are content to observe this development.”

May 29 (Reuters) – Brazil’s mining giant Vale (VALE5.SA: Quote, Profile, Research)(RIO.N: Quote, Profile, Research) decided to sell its stake in Usiminas (USIM3.SA: Quote, Profile, Research) because it opposed the steel maker’s expansion into iron ore mining and slow growth in its core steel business, its top executive said on Wednesday.

Vale Chief Executive, Roger Agnelli, cited “strategic divergence” as the reason for selling the 5.89 percent voting stake in Usiminas, which makes up 2.9 percent of its overall capital. Vale first announced the decision to quit Usiminas said on Monday, but provided no explanations.


“Usiminas should be spearheading growth in Brazil’s steel industry. I think, in a way, it was a bit slow in its strategy,” Agnelli told reporters.


Agnelli, who heads the world’s biggest producer of iron ore also criticized Usiminas’ decision to invest in iron ore, which he said came to the detriment of steel output growth.


“I don’t think it’s a positive strategy for Usiminas … to deviate its focus from steel to mining even though they were never short of iron ore.”


Usiminas bought three local iron ore companies — J. Mendes, Somisa and Global Minercao — for around $1 billion in February.


Brazilian steel companies like Companhia Siderurgica Nacional (CSN) CSNA3.SAi(SID.N: Quote, Profile, Research), Usiminas and the local unit of ArcelorMittal (ISPA.AS: Quote, Profile, Research) are investing to develop reserves and boost exports of the raw material, lured by its high international prices and steel capacity growth.


Usiminas plans to start exporting iron ore this year in small quantities, reaching 7 million tonnes in 2013. But it has also said it will boost steel output to 15 million tonnes in 2013 from 9 million tonnes now.


Usiminas officials were not immediately available for comment on Agnelli’s remarks.

Agnelli said Vale would use the money from the sale of its stake to maintain its investment in other steel companies.


Other Usiminas shareholders include Nippon Steel Corp (5401.T: Quote, Profile, Research) with a 24.7 percent voting stake, and a group formed by Brazilian conglomerates Votorantim and Camargo Correa. That group has a 23.1 percent voting stake.


Vale’s partners can use preferential rights in acquiring the stake, but Agnelli said none of them has manifested interest so far.


Usiminas ordinary shares jumped 5.46 percent on Wednesday to 91.8 reais, while Vale rose 2.03 percent to 55.8 reais. The broader market rose 3 percent.